COVID-19’s Impact on Benefits & ProgramsCOVID-19’s Impact on Benefits & Programs Darcy L....

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MAKING SENSE OF COVID-19’S IMPACT ONBENEFITS AND PROGRAMS

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TODAY’S PRESENTERS

John JeffreyCorporate Counsel at Alerus

Moderated by Mary Isenburg

Darcy L. HitesmanHitesman & Wold, P.A.

COVID-19’s Impact on Benefits & Programs

Darcy L. Hitesman Hitesman & Wold, P.A.

Hitesman & Wold, P.A. 4

Introduction

• It’s raining legislation and guidance.• Families First Coronavirus Response Act (“FFCRA”).

• Signed into law (“enacted”) March 18, 2020.• Effective generally April 1, 2020.

• Friday, March 20, 2020 Treasury and DOL guidance issued IR-2020-57 (direction regarding tax credit, anticipated exemptions for certain small businesses, and 30-day non-enforcement if reasonable and good faith efforts).

• The Coronavirus Aid, Relief, and Economic Security Act (CARES Act).• Signed into law (“enacted”) March 27, 2020.• Technical corrections and new areas of need.

• IRS COVID-19-Related Tax Credits (66 FAQs) March 31, 2020 (last reviewed/updated).

• DOL Temp. Regs. 29 CFR Part 826 (April 1, 2020).


Focus Areas for Today

• Employer Sponsored Group Health Plans• COVID-19 Testing• Telehealth• OTC with no Rx (and expanded reimbursable expenses)

• Emergency Paid Sick Leave & Expanded FMLA• Terms and Conditions• Paid Leave Tax Credits


Employer Sponsored Group Health Plans


Employer Sponsored Group Health Plans

• Several provisions address issues related to employer sponsored group health plans.

• COVID-19 Testing and Vaccines.• Treatment of Telehealth.• Revised OTC and Reimbursable Expenses.


Employer Sponsored Group Health Plans—COVID-19 Testing• Introduced under FFCRA; revised under CARES Act.• Requires group health plans and insurance carriers to cover, without

cost sharing to individual:1. Cost of diagnostic testing to detect/diagnose COVID-19.

• Lists sources of products; anticipates new products.• Addresses cost as between group health plan and insurance carrier.

2. Cost of any “qualifying coronavirus preventive service” as a preventive care benefit under ACA. • “Qualifying coronavirus preventive service” is an item, service, or immunization that is

intended to prevent or mitigate COVID-19 and otherwise meets the preventive care requirements under ACA.

• Normally first day of the plan year beginning after one year from the recommendation!!• Accelerated 15 day effective date.


Employer Sponsored Group Health Plans—COVID-19 Testing• Not required to go beyond testing.• Some plans are going beyond testing and including treatment.• IR 2020-54 (March 11, 2020) testing and treatment does not

preclude HSA contributions.• Issues if insured

• Minnesota Governor’s “request” to insurance carriers.• Issues if self-insured.• Requires plan amendment.


Employer Sponsored Group Health Plans—Telehealth

• HSA provisions amended to allow telehealth (and other remote care services) before HDHP deductible has been met without jeopardizing HDHP status or eligibility to make HSA contributions.

• Telehealth not limited to Coronavirus purposes.• Temporary – plan years beginning on or before December 31, 2021.• Does not change ERISA or ACA rules regarding stand alone group

health plans.• Must be part of, or integrated with, group health plan that meets ACA

mandates.• ERISA requirements apply – written plan document, SPD, COBRA, claims

procedures, etc.• Likely requires plan amendment.


Employer Sponsored Group Health Plans—OTC Drugs and Medications• Not temporary.• Over the counter medications.

• No longer required to have Rx.• Reimbursable before deductible has been met for HDHP.• Reimbursable under health FSAs, HRAs, and HSAs.

• Menstrual products now reimbursable.• Expenses incurred on or after January 1, 2020.• Review plan document, SPD/summary materials, posted/published.

lists of reimbursable expenses.


NOTE: May be helpful for employees with Health FSAs negatively impacted by delay in many not-urgent procedures.

Ripple Effects

• These changes do not occur in a vacuum.• Administrative systems.• Plan documentation (including written plan document and SPD for

ERISA entities; just written plan document or non-ERISA).• Communication to plan participants (include retirees,

COBRA/continuation persons, QMCSO persons).• Recommend using multiple means:

• Posting• Written• Electronic• Phone messaging


Emergency Paid Sick Leave & Expanded FMLA


Emergency Paid Sick Leave Act

• Emergency Paid Sick Leave• Effective April 1, 2020.• Temporary – through December 31, 2020.

• Significant detail provided by DOL Temporary Regulations (issued April 1, 2020).



• Employers • Private sector employer -- fewer than 500 employees.

• All employees; not FTEs.• Controlled group integrated employer rules apply.

• Public agency – at least 1 employee.• Small plan exemption possible.

• DOL Temporary Regulations provide details.• Note, not what many expected!


Small Employer Exemption

• Applies for both Emergency Paid Sick Leave and Emergency FMLA Leave.• Employer with fewer than 50 employees is exempt when:

• Imposition of requirements would jeopardize the viability of the business as an ongoing concern.

• Authorized officer of the business must determine (and document) one or more of the following:

• Leave requested would result in expenses and financial obligations exceeding available business revenues and would cause business to cease operating at a minimal capacity;

• Leave requested poses substantial risk to financial health or operational capabilities of the business because of specialized skills, knowledge of the business, or responsibilities; or

• Not sufficient workers able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services by the employee(s) requesting leave and those labor or services are needed to operate at minimal capacity.


Small Employer Exemption

• Exemption is not a blanket exemption.• Exemption from having to provide benefits in relation to particular leave

requests.• Still need to have programs in place.• Create a file memo for each application and keep with records; no need to

send provide to anyone.• Effective April 1, 2020.



• Eligible Employees• All employees.• No employment duration requirement.• No hours threshold.

• Excluded Employees• Employer may exclude “health care worker” or “emergency responder.”

• Each is defined in DOL Temporary Regulation.• Similar but not same as previous IRS guidance.• See slide following end of presentation for actual definitions from DOL Temporary

Regulations.


Emergency Paid Sick Leave Act - Triggers

Trigger Event – Eligible Employee may take emergency paid sick leave if unable to work (including telework) because of any of the following six reasons:1. Employee is subject to Federal, State, or local quarantine or isolation order related to

COVID-19.2. Employee has been advised by health care provider to self-quarantine due to concerns

related to COVID-19.3. Employee is experiencing symptoms of COVID-19 and seeking medical diagnosis.4. Employee is caring for individual subject to order as described under 1. or has been

advised under 2.5. Employee is caring for son/daughter if the school or place of care has been closed or

the child care provider is unavailable due to COVID -19 precautions.6. Employee is experiencing other substantially similar condition specified by agencies.


NOTE: Significant detail added through DOL Temporary Regulations.


1. Employee is subject to Federal, State, or local quarantine or isolation order related to COVID-19.• Includes quarantine, isolation, containment, shelter-in-place, or stay-at-

home orders issued by any Federal, State, or local government authority.• Can be order just for certain classifications of citizens (e.g., based on age or

medical conditions).• Causation. Only if, but for being subject to the order, employee would be

able to perform work otherwise allowed/permitted by employer either at employee’s normal workplace or through telework and the employer has work for the employee.



2. Employee has been advised by health care provider to self-quarantine due to concerns related to COVID-19.• Health care provider’s belief:

• Employee has COVID-19;• Employee may have COVID-19; or• Employee is particularly vulnerable to COVID-19.

• Causation. Following advice to self-quarantine prevents employee from being able to work either at employee’s normal workplace or by telework and the employer has work for the employee.



3. Employee is experiencing symptoms of COVID-19 and seeking medical diagnosis.• Experiencing symptoms: fever, dry cough, shortness of breath, or any other

COVID-19 symptoms identified by CDC.• Seeking medical treatment: paid time is limited to time employee is unable

to work because affirmative steps taken to obtain a medial diagnosis (e.g., making, waiting for, or attending an appointment for a COVID-19 test).

• Causation. But for the need to take paid sick leave, employee would be able to perform work for employer, either at employee’s normal workplace or by telework and the employer has work for the employee.



4. Employee is caring for individual subject to order as described under category 1 or has been advised under category 2.• Same requirements as category 1 or category 2.• Caring for individual: immediate family member, person who regularly

resides with employee, or similar person where there is a relationship that creates an expectation. Individual does not include person with whom employee has no personal relationship.

• Causation. But for the need to care for individual, employee would be able to perform work for employer, either at employee’s normal workplace or by telework and the employer has work for the employee.



5. Employee is caring for son/daughter if the school or place of care has been closed or the child care provider is unavailable due to COVID -19 precautions.• Son or daughter. Biological, adopted, foster, step, legal ward, standing in

loco parentis and under 18, or 18 or older and incapable of self-care because of mental or physical disability.

• Reason. Need to take paid sick leave because: • Unable to work due to need to provide care;• School or place of care closed due to COVID-19; and• No other person available to provide care during time of paid sick leave.

• Causation. But for the need to care for individual, employee would be able to perform work for employer, either at employee’s normal workplace or by telework and the employer has work for the employee.



6. Employee is experiencing other substantially similar condition specified by agencies.• Currently not available.• May be defined at any point during April 1, 2020 through December 31,

2020.



• Benefits – Hours Paid• Full-time employees – up to 80 hours paid sick leave; two week period.• Part-time employees – up to paid hours would normally work over two week

period.

• Status Defined• Full-time for purposes of this program: regularly scheduled to work 40 hours

per week.• Part-time for purposes of this program: regularly scheduled to work less than

40 hours of week.



• Value of the Paid Hour• Reasons 1, 2, 3 – average regular rate of pay not to exceed $511 per day;

$5,100 total.• Reasons 4, 5, 6 – 2/3 average regular rate of pay not to exceed $200 per day;

$2,000 total.

• “Average regular rate of pay” basically what employee normally gets paid for the hours worked using a six-month look back period.



• Other Rules• Not required to find substitute.• Benefits cease with next regular work shift following no further need.• Does not carryover; unused does not get paid in cash.• Cannot require use of other paid leave first.• Can require reasonable notice but cannot require it in advance.• Posting requirement – DOL issued required model notice.


Emergency Family and Medical Leave Expansion Act• “Expanded” FMLA

• April 1, 2020.• Temporary – through December 31, 2020.• Special terms just with respect to expanded benefits; other terms under existing FMLA (e.g.,

substantiation, handling COBRA). • Many will have existing FMLA policy.• Smaller employers (less than 50 employees) will not have existing FMLA policy.

• Employers• Fewer than 500 employees.

• All employees; not FTEs.• Controlled group integrated employer rules apply.

• Same small employer exemption as for Emergency Paid Sick Leave (earlier slide).• Appears to be on a leave request by leave request.• Need to have special FMLA policy for Emergency FMLA Leave in place.


Emergency Family and Medical Leave Expansion Act• Eligible Employees

• Employed for at least 30 calendar days.• On payroll.• Special rule for re-hires – count days before termination.• Special rule for temporary employees subsequently hired – count temp agency days.

• No hours threshold.• Employer may exclude “health care worker” or “emergency responder.”

• Each is defined in DOL Temporary Regulation.• Similar but not same as previous IRS guidance.• See slide following end of presentation for actual definitions from DOL Temporary

Regulations.


Emergency Family and Medical Leave Expansion Act• Trigger Event

• Eligible employee unable to work (including telework) because must care for his/her child under age 18 whose school or place of care has closed due to COVID-19 public health emergency.

• Note: Special rule for 14 years of age and over in IRS guidance not in DOL Temporary Regulation.

• Employer must have work for employee to do.• “Public health emergency” defined as “emergency with respect to COVID-19

declared by a Federal, State, or local authority.”• Includes orders discussed for purposes of Emergency Paid Sick Leave


Emergency Family and Medical Leave Expansion Act• Benefits

• Up to 12 weeks; first 10 days (i.e., two weeks) unpaid, remainder paid.• Same12 weeks as overall FMLA maximum.

• Can substitute available paid leave for first 10 days.• Emergency Sick Leave (if applies).• Other paid time programs.

• Paid leave is hours worked at 2/3 average regular rate of pay.• Can substitute available paid leave too as long as total not over 100% average regular

rate of pay.• Maximum $200 a day; $10,000 total.• “Average regular rate of pay” generally what employee normally gets paid for

the hours worked using a six month look back period.• Remember: Status quo on health plan coverage(s) – No COBRA triggered.


Emergency Family and Medical Leave Expansion Act• Other Rules

• If foreseeable, employee needs to provide practicable notice.• Restoration requirements for employers with fewer than 25 employees–

employee not entitled to same position following exhaustion of leave if: • Employee’s position when leave started does not exist due to economic conditions or

other changes in operating conditions of employer.• Employer makes reasonable efforts to restore to an equivalent position (benefits, pay,

and terms and conditions of employment).• If reasonable efforts fail, must make reasonable efforts during contact period to contact

employee if equivalent position becomes available.• “Contact period” is the earlier of end of public health emergency or 12 weeks after date on

which leave commenced.• Appears to be employee by employee determination.


Ripple Effects

• These changes do not occur in a vacuum.• HCR reporting/penalties because W-2 wages are only 2/3 normal wages.• Other benefits tied to W-2 wages.• Tracking as part of overall 12 week maximum under FMLA.• Cafeteria plan.

• No general authority to allow changes due to wage reduction.• Dependent care reimbursement can be changed.

• Existing Paid Time Programs.• Leave Donation Programs.

• Employee (and family) medical emergencies (Rev. Rul. 90-29).• National disasters.


Paid Leave Tax Credits

• NOT AVAILABLE TO STATE POLITICAL SUBDIVISIONS.• Employer allowed 100% credit toward payroll taxes for:

• Emergency Paid Sick Leave.• Expanded FMLA.Note: Together referred to as “Qualified Leave Wages.”• Qualified Health Plan Expenses.• Employer’s share of Medicare Tax on above.

• Heavy employer substantiation requirements.



• Qualified Health Plan Expenses.• “Amounts paid or incurred by the Eligible Employer to provide and

maintain a group health plan.”• “Group health plan” defined broadly. Includes traditional group health plan, dental

plan, vision plan, wellness program, HRA, health FSA; not HSA. IRS FAQ 36.• “Amounts paid or incurred” includes amounts paid by Eligible Employer and amounts

paid pre-tax by employee; does not include amounts that were taxable to employee or for which employee paid on after-tax basis. IRS FAQ 31.

• Note: Expense included only to extent not included in employee’s gross income under Section 106 of the Code.

• Properly allocated to the qualified leave wages.• Pro rata among covered employees. IRS FAQ 33, FAQ 34.• Pro rata based on period of coverage. IRS FAQ 33, FAQ 34.



• Credit against payroll taxes otherwise due for entire employee population.

• Calculated on quarterly basis.• Form 941.

• Employer retains amount of federal employment taxes otherwise due rather than depositing with IRS.

• If deposit too much with IRS, treated as overpayment and refunded.• If not enough payroll taxes to offset, employer able to file request for

advance payment from the IRS. • New IRS Form 7200 https://www.irs.gov/pub/irs-pdf/f7200.pdf


https://www.irs.gov/pub/irs-pdf/f7200.pdf

Paid Leave Tax Credits –Employer Substantiation• Employer needs to be able to substantiate tax credit amount.

• Must “retain records and documentation related to and supporting each employee’s leave to substantiate the claim for the credits.” IRS FAQ 4.

• Documentation showing how determined amount of Qualified Leave Wages paid to employee that is eligible for credit. IRS FAQ 45.

• Documentation showing how determine amount of Qualified Health Plan Expenses allocated to those qualified leave wages. IRS FAQ 45.

• Forms 941s, Form 7200 (new), other filings made with IRS requesting credits. IRS FAQ 4, FAQ 46.

• Recordkeeping requirement: 4 years after the date tax becomes due or is paid, whichever is later.


NOTE: Can all be gathered as part of request for leave process.

Paid Leave Tax Credits –Employer Substantiation• Employee provided information (see IRS FAQ 44):

• Name (employee or person to be cared for).• Dates of requested leave.• Employee statement that COVID-19 is the reason requesting leave.• Employee statement that employee is unable to work (including telework) for the reason requesting leave.• Quarantine order or self-quarantine advice, need name of governmental entity ordering quarantine or name

of health care professional advising self-quarantine (cannot be the employee). • School closing or unavailability of child care provider, need to provide name and age of child(ren), of school or

place of care, and statement that no other person will be providing care during the period of time the employee is receiving benefits.

• Special rule for children over 14 years of age (under IRS, but not DOL Temporary Regulations).


NOTE: A lot of the information employer needs to substantiate tax credit can be gathered as part of request for leave process.

Additional Recommendations



• Get payroll involved!!• Inventory what you have, including --

• Group Health Plan(s) – broad definition used (e.g., traditional group health plan, dental plan, vision plan, HRA, health FSA, wellness plan, etc.); not HSA.

• Cafeteria Plan.• Current FMLA Policy.• Paid Time Programs.• Leave Donation Program.

• Determine what FFCRA and CARES Act require and what they permit.• Reflect substantiation information on administrative forms. • Reflect approval/denial (with reasons) on administrative form.



• Adopt plan language, policy language.• Temporary.• Collective bargaining concerns.

• Communicate to those affected.• Use multiple means:

• Posting• Written• Electronic• Phone messaging

• Designate person for questions.• Keep all records (including memoranda to file) for 4 years, including if deny

requested leave.• Eyes open regarding future regulatory guidance.


Keep Your Eyes Open

• More to come –• Many things authorized take agency action of some sort to work; starting to

see some of that.• Other authorizations provide agency discretion; for example, CARES Act gives

DOL authority to postpone certain compliance deadlines. Could this mean a delay in Form 5500 Filings?

• Discussions about further legislative packages.• Technical corrections.• New areas of need.


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WE WELCOME YOUR QUESTIONS

THANK YOU!Darcy L. Hitesman

Hitesman & Wold, P.A.11238 – 86th Avenue North

Maple Grove, MN 55369Phone: 763-503-6620

Email: [email protected]


Definitions• Health Care Workers

• anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, employer, or entity. This includes any permanent or temporary institution, facility, location, or site where medical services are provided that are similar to such institutions. This definition includes any individual employed by an entity that contracts with any of the above institutions described above to provide services or to maintain the operation of the facility where that individual’s services support the operation of the facility. This also includes anyone employed by any entity that provides medical services, produces medical products, or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles, or treatments. This also includes any individual that the highest official of a state or territory, including the District of Columbia, determines is a health care provider necessary for that state’s or territory’s or the District of Columbia’s response to COVID-19.

• Emergency Responder• anyone who is necessary for the provision of transport,

care, health care, comfort, and nutrition of such patients, or other needed for response to COVID-19. This includes but is not limited to military or national guard, law enforcement officers, correctional institution personnel, fire fighters, emergency medical services personnel, physicians, nurses, public health personnel, emergency medical technicians, paramedics, emergency management personnel, 911 operators, child welfare workers and service providers, public works personnel, and persons with skills or training in operating specialized equipment or other skills needed to provide aid in a declared emergency, as well as individuals who work for such facilities employing these individuals and whose work is necessary to maintain the operation of the facility. This also includes any individual that the highest official of a state or territory, including the District of Columbia, determines is an emergency responder necessary for that state’s or territory’s or the District of Columbia’s response to COVID-19.

Hitesman & Wold, P.A.47

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